Talisman’s troubled Yme oil project faces more delay

OSLO — Talisman Energy’s troubled Yme oilfield off Norway could remain offline throughout 2012, its chief executive said, a further setback for an already much delayed project which has weighed on the Canadian company’s earnings and share price.

Talisman aims to refocus on core activities in 2012 after mistakes last year and may shed some conventional assets to focus on its non conventional portfolio, John Manzoni, Talisman’s president and chief executive told Reuters.

“In my own projection, and we’re not alone in the project, I’ve essentially accommodated for the fact that (Yme) will not come on this year,” Manzoni said in an interview.

Talisman has not counted on Yme in its annual targets but analysts and some partners, had hoped this was out of caution to avoid another negative surprise after the project, designed to produce at a peak 40,000 barrels per day of crude oil, saw several deadlines come and go.

Polish refiner Lotos, which holds a 20 percent stake in Yme in the North Sea, expected as recently as last month to start production by the middle of 2012.

“The platform is offshore and we have to redo a lot of work that for one reason or another is clearly not meeting Norwegian specifications,” Manzoni said.

Dutch maritime oil and gas engineer SBM Offshore, the world’s largest supplier of floating production, storage and offloading platforms, earlier warned it will book a $450 million impairment charge for 2011 due to the Yme dispute with Talisman.

“Continuing intransigence and unreasonable client demands, which are being aggressively resisted, are contributing significantly to the very low productivity and increased scope of work, all of which are the subject of arbitration proceedings with the client,” SBM Offshore said late last month.

SBM Offshore could not immediately comment on Thursday.

Talisman is the operator of Yme with a 60 percent stake while Lotos holds 20% and Norske AEDC and Wintershall each own 10%.

CORRECTING MISTAKES

Manzoni said management mistakes contributed to the company’s relatively weak performance last year and correcting those mistakes will be the focus in 2012.

“We didn’t execute well in 2011 and that has to be fixed,” he said. “That’s reflecting in the relative share price, the paper is less strong in a relative sense than it was. That has to be fixed before you start stepping out and hoping to be more acquisitive.”

Talisman’s shares fell 45 percent over the past year due in part to production setback.

A major goal for this year will be to sell up to $2 billion worth of non core assets and focus on liquid-rich shale activity, Manzoni said.

“We’re frankly not putting the people or capital into conventional projects that we could to maximize the portfolio, so there’s assets there that might be better in somebody else’s hand,” Manzoni said.

Manzoni also remained downbeat on North Sea assets in the UK. “The UK is quite volatile, the tax regime has changed fairly abruptly… and we didn’t execute terribly well on various issues so I’ve said we don’t need as much of the North Sea in our portfolio, so we need to find ways of reducing our exposure to that part of the business.”

But Manzoni remained upbeat about liquid-rich shale in North America and its South American exploration.

He also said Talisman will continue to drill in Kurdistan but will not increase capital expenditure too quickly until the outlines of a political settlement there become more clear.

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